SHANGHAI: China’s blue-chip index dropped to its lowest in over 4-1/2 years on Monday, with markets subdued due to the ongoing property crisis and lower chances of stimulus after a set of strong economic data, exacerbated by the Middle East conflict.
** China’s blue-chip CSI300 Index dropped 0.6% by the lunch break, hitting its lowest level since February 2019, while the Shanghai Composite Index fell 0.8%, touching its lowest level since late 2022.
** Chinese shares continued to drop, with the CSI300 down 4.2% last week.
** Multiple factors were in play, including headlines around the export ban by the US, the widening Middle East conflict, and China’s strong third-quarter economic data print likely being interpreted as leading to a lower likelihood of stimulus in the fourth quarter, UBS analysts wrote in a note.
** While regulators have introduced several policy tweaks to bolster market sentiment, Thomas Gatley, China strategist at Gavekal Research, argued that onshore markets face two problems that defy quick solutions: high global yields and the ongoing property crisis.
** Property sales remain weak and developers are under intense cash flow pressures.
** The US enjoys the biggest yield advantage against China in 21 years, with the yield gap between China’s 10-year government bonds and their US counterparts at 226 basis points.
China stocks hit new low as investor confidence remains depressed
** Shares of Foxconn Industrial Internet Co. slumped 10%, after media reported its parent company Foxconn , a major supplier of Apple’s iPhones, was the subject of tax audits and land use probes.
** Semiconductor stocks were down 1.6%.
** Hong Kong market is closed on Monday for public holidays.